Introduction to Macroeconomics

The study of the overall economy, focusing on factors like national income, inflation, and unemployment.

The idea that individuals acting in their own self-interest can benefit society as a whole.

The belief that the economy works best when there is minimal government intervention.

A school of economic thought that emphasizes the importance of agriculture in creating wealth.

The work of Adam Smith that is considered to be the foundation of modern economics.

The concept that individuals are motivated by self-interest, even in the act of buying and selling.

The state's use of taxes, spending, and other financial tools to influence the economy.

The central bank's actions to control the money supply and interest rates.

Instead of analyzing each individual good or service separately, macroeconomics uses a representative good to represent the overall output of the economy.

The production level of the representative good reflects the average output of all goods and services in the economy.

The representative good's price reflects the overall price level of the economy.

The representative good's employment level reflects the overall employment level of the economy.

Macroeconomic analysis often simplifies by looking at the behavior of a single representative good.

The simplification assumption works because changes in prices, interest rates, wages, and profits tend to be similar across different goods and services.

When the economy faces rapid changes, like inflation or depression, the direction of change for individual goods and services usually follows the overall trend.

Sometimes, the economy is better understood by examining distinct sectors, such as agriculture, manufacturing, and services.

Individuals or groups that make economic decisions, like consumers deciding what to buy or producers deciding what to produce.

A situation where the quantity of goods supplied by producers matches the quantity demanded by consumers.

A situation where markets fail to reach an equilibrium due to issues like monopolies or externalities.

Companies that act in the best interest of their shareholders, even if it goes against the interests of the country as a whole.

The study of the overall equilibrium of supply and demand across all markets in an economy.

Actions taken by governments to influence the economy, such as setting interest rates or adjusting taxes.

Large-scale goals that governments aim to achieve, such as low unemployment, stable prices and economic growth.

An organization that serves the public good, such as the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).

A situation where many people are willing and able to work but cannot find jobs.

The situation where the overall price level of goods and services is rising over time.

Analyzing the relationships between different sectors of the economy, like agriculture and industry, or households, businesses, and government.

An economic system where private individuals and businesses own the means of production and operate for profit.

Looking at the economy by considering only a single representative good, labor, or technology, ignoring the unique characteristics of individual ones.

The resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Recognizing that different types of goods, labor, and production technologies exist and studying their individual effects on the economy.

A severe worldwide economic downturn, characterized by high unemployment and decreased production, that lasted from 1929 to 1939.

The percentage of the labor force that is unemployed and actively seeking work.

Different sectors of the economy influence and impact each other, creating a interconnected system.

The study of how prices, output levels, and employment are determined for different goods and industries within the economy.

The price paid for labor, usually expressed as an hourly or annual wage.

The profit earned by businesses from their operations, calculated as total revenue minus total costs.

Understanding the unique characteristics of individual goods, labor, and production technologies instead of treating them as interchangeable.